Speech on Attempts to Alter Superannuation Governance Laws
11.00am | January 25, 2018
The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017 and the Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017 seek to fundamentally alter the governance arrangements that have been in place for superannuation since it was first put in place by a Labor government. The legislation does that by requiring that registrable superannuation licensees have at least one-third so-called independent directors and that the chair of the board also be one of those independent directors. It also abolishes any requirement that the remaining directors comprise 50 per cent employers and 50 per cent representatives of the workers who are members of that fund. In doing that, it creates the possibility that a board could be entirely controlled by these independent directors and employers only.
This is a profound intervention into the Australian superannuation system, and what is particularly troubling is that there is absolutely no justification provided for why this is occurring. Normally in public policy we ask, 'What problem are we trying to solve?' Where isthe problem here? For all of the previous speaker's references to sticky fingers and scary ideas, I challenge people to identify a significant national scandal involving an industry super fund. I challenge them to do so, and I then ask them to think carefully about the scandals—scandal after scandal after scandal after scandal—that have plagued the retail banking sector. And I ask: why is it that before the parliament now is this bill and not a bill that goes to the problems in the banking sector and not a bill that would establish a royal commission so that we could finally get to the bottom of these problems? In the absence of any clear description of what problem we're trying to solve, I can only conclude one thing: this is just one more intervention by a government that is absolutely determined to use the power of the state, the power of government, to go after its political opponents.
The history of super is this: people on the other side of the chamber have always hated it. They hated the idea that ordinary working people might get access to super—which was, historically, a privilege afforded only to very-highly-paid white-collar workers. They hated the idea that workers might take their admittedly small pool of individual savings and put them together so that they could compete in the investment market on even ground with the big investors—the people with a lot of money. They hate it. They really hate that the boards of superannuation firms are made up of representatives of workers—because that's really what this bill is all about: it is about stopping ordinary working people and their representatives from managing their own money. It's actually pretty clear. It is about taking away positions on existing boards that are presently occupied by truck drivers and nurses and retail workers and handing them to individuals drawn from the finance sector. Doing that is, in the first instance, a deeply unethical use of the power of government. It is simply about going after one's political opponents using the resources of government, rather than acting in the public interest. That is very, very wrong.
But, sadly, it's a set of behaviours that we've seen more and more from this government as it becomes more and more unhinged and more and more preoccupied with its own problems. We need only look to the events of the last couple of weeks, when the Registered Organisations Commission was utilised to launch a raid on the AWU, principally for the purposes of going after the Leader of the Opposition and utilising all the resources of government to do so. This is not proper use of government resources. It's not proper use of the power of government. It is not actually consistent with a commitment to democratic norms, and people ought to be very, very worried about the way this government is behaving.
To go back to the bill before us: this bill seeks to replace the current model of the representation of workers and employers on superannuation boards. Where will these independent directors come from? Well, they'll come from the finance sector—that's very clear. What this effectively means is that this is a bill that seeks to replace the current model of governance with one that looks a lot more like the culture that is present in banking.
Speakers from the coalition here in the chamber have spoken about the virtues of independence. Well, independent directors are very important for listed companies, for corporations, and the main criteria for an independent director in that environment is that they be independent of management. The reason that we want an independent director on a company board is that, in the past, there have been problems with executive directors—people drawing a salary from the company—who've manipulated processes of corporations to support their own needs as employees, their own salaries and their own perks, instead ofdelivering for shareholders. That's a real dynamic. That's not a feature of industry super organisations. So the question really is: independent from what? What they really mean is independent from workers' representation. The interjection is 'independent from unions'. I ask the question: why is it that those opposite are so obsessed with preventing working people from organising themselves into a group and having representation at the top table? Why shouldn't they be represented in the parliament? Why shouldn't they be represented in the boardroom? Is it only the children of very wealthy people who ought to be represented in those places? No, it's not. Of course working people should be able to organise themselves and of course they should be in a position to influence control of their own money and their own savings. Superannuation isn't a gift from employers. It's wages—wages that would have been paid to those people, but, instead, workers agreed to have that money put into retirement savings. A condition of that agreement is that they would get to control that money.
Perhaps, the government might argue, there's some problem with the performance of those superannuation funds where workers and employers manage their money. Well, that's just not true. The not-for-profit funds, with the boards that generally contain a majority of representative directors, haven't had scandals and they have out-performed the for-profit funds, including the bank funds, by almost two per cent every year from June 2003 to June 2014. There is actually a link between this model of governance, with employers and workers sitting around the board together, and very good performance in terms of investment. It's worth thinking through why that is.
I put it to you that, actually, people drawn from the real economy make better investment decisions. There are a group of people living in the finance sector who are largely pretty disassociated from the real economy. They are themselves quite wealthy people and they mix with other people who also work in the finance sector. There's actually something very powerful about having a board made up of employers from the real economy and the workers who work there. It makes a real difference in how people approach investment decisions. I think that same composition generates a culture where people are willing to challenge norms that might be accepted norms in the finance sector and are willing to say: 'Hey, why is it that we clip the ticket on this particular transaction? Why is it that we allow a commission that's this generous or has a margin this generous on this particular service?' These people are used to managing their own money; they treat it like it's their own.
It goes to the third question. These organisations don't have shareholders; they don't have banking investors waiting for their payout at the end of the year. These are not-for-profit funds that have the ethos that any earnings produced by the funds should go back to members. It's a members-first ethos driven by the representative nature of these boards, and it has produced very, very good results. Why would we disrupt and interrupt that model? These same boards have played a significant role in building the assets in the Australian economy. This is patient capital. This is money that can sit in an asset for a long time. These are pools of funds that are quite stable, and one of the great innovations of the industry super sector is that it's been able to use that money to invest in Australian infrastructure, and it's produced very important outcomes for our country in terms of capital formation. Again, why are we trying to intervene in this particular model when it is doing so well and yet the banking sector, which they're trying to replace the industry model with, is having so many difficulties? What is the real objective here? I go back to my original conclusion. This is not about improving governance in the superannuation sector. This is not about improving outcomes for ordinary people who have their money invested in these superannuation funds. This is simply an ideological obsession with eliminating the role of trade unions from public life in this country. It is about an ideological hostility to working people organising collectively and being recognised and represented. It is a completely unacceptable basis on which to make a substantial intervention into a trillion-dollar industry. It is a completely appalling way to proceed, and I encourage all senators who may be listening to this debate and considering their position on the legislation to vote against the bill that's before us.